If you are like me you get excited about the 10%-13% expected APY on BTCJam (a peer to peer lending company).
If you are like me then you also know about the importance of diversification.
If you are like me then you also know it is important not to loan to friends.
If you are headstrong like me you are also likely to ignore sound advice :)
If you are headstrong like me you might even ignore a warning like the one BTCJam put on the loan page in bright red letters:
“The interest rate for this listing is below the recommended amount for this risk profile, invest with care.”
This post will explain what I learned about collecting arbitration awards when ignoring sound diversification advice :)
##Backstory
The Good:
- The debtor is returning my communications.
- The debtor and I live in the same city.
- The debtor has an income.
- The debtor didn’t dispute my arbitration award.
The bad:
- The debtor is unable to pay me.
- We are friends.
- I don’t like being a loan collection agent.
February 28, 2015 I loaned a friend 14.63453902 bitcoins for 90 days through BTCJam. I planned on loaning more, but because of my personal security procedures and bank slowness I couldn’t (lucky me).
When considering the loan, my biggest concern was the ability of my friend (the borrower) to repay in the face of a massive bitcoin price run-up. (I am a Bull right?) We live in the same city and he is a software developer.
To mitigate that concern I planned on purchasing additional bitcoins to cover the loan. This would peg my cost basis to dollars instead of bitcoin. Unfortunately I didn’t make the purchase in time and loaned my friend bitcoins from my bitcoin savings.
Life was looking good when the borrower made his first payment (April 2015) on time!
Unfortunately that was the last timely payment. Actually it was the last payment at all.
At some point (I believe near the end of May) I received an email that the loan was in default or late. I might have also received another email stating the loan was in default. I believe I remember getting those, but I can’t find them. I have also turned off almost all BTCJam emails.
August 3rd I received an email from net-arb.com titled: “BTCJAM Loan Arbitration Award - Creditor42”
It contained this key document: “Binding Arbitration Award”
As I understand this document it is documentation of an irreversible (nearly - hence the term ‘binding’) arbitration decision that can be used in a court of law to enforce the arbitration award.
Missing Piece - How to Enforce
The email explained the arbitration award and discussed enforcing the award.
Unfortunately the links to enforcement on net-arb’s site in the email were broken.
Off to Google I go…
Enforcing Arbitration (summarized from lectlaw)
Here is the process of enforcing arbitration as I understand it right now.
- Identify the appropriate court (yes international awards have been enforced)
- File a motion for confirmation with that court (ASAP, but within one year)
- Obtain Judgment on the arbitration award
- Seek an order of execution from the court (if the judgment debtor doesn’t voluntarily comply). The order of execution directs a sheriff to seize the debtor’s property.
I’m at the beginning of this process. I will keep you updated as I learn more…
If you are going through arbitration and have any questions let me know in the comments and I’ll do what I can to help you.
#Addendum
As promised here is the arbitration award email text so you know exactly what to expect:
Attached is a copy of the Arbitration Award pertaining to BTCjam Loan No. 36131
NOTE: Copies of this award have been sent to all parties involved. The Debtor's copy identifies Creditors only by their BTCjam member numbers. Creditor copies are personalized, separating the total loan into its separately funded parts so that each award can stand on its own.
Here is some information about the Arbitration Award.
The Award resulted from a pro forma arbitration hearing held under the terms of a contract between BTCJam and net-ARB whereby BTCJam loans that are 90 days or more in arrears are referred for arbitration. The debtor is given the opportunity to appear in an online arbitration hearing to argue against default. Had the debtor for your loan chosen that option, you along with any other co-creditors would have been notified to appear as well.
When the debtor declines the opportunity or does not respond, BTCJam sends the loan information to net-ARB certifying that the debtor is in default and has not chosen to contest a default decision in the creditors' favor. The PDF document you received is the final Arbitration Award in your favor from that process.
What can I do with the Award?
That's the question everyone is asking. I have a document - now what? How do I get paid?
The mechanics are straightforward and explained here on our website: http://www.net-arb.com/FAQ.
It may be possible for co-creditors on a particular loan to join together to pursue collection, but you will have to contact BTCJam Support for information about possible co-creditors since the rules of arbitration prevent us from sharing personal information. We advise you to consult an attorney regarding the feasibility of undertaking any collection action before embarking on that path.
BTCJam views arbitration as another step toward global acceptance and respect for bitcoin. In the future BTCJam hopes to couple these arbitration awards with a network of collection agencies to facilitate recovery of bad debts for their users.
We hope you found this information helpful.
Here is more information you may find helpful in answering any questions.
ENFORCING THE AWARD - COLLECTION
Unfortunately, receiving an arbitration award is only the first step toward being paid what you are owed. It is the biggest step however, with the remaining steps being just routine but necessary paperwork & filing. The process is described here on our FAQ page. The court action generally must be filed in the jurisdiction where the debtor resides. While we know this is not an ideal solution for collecting your loan, it is the best solution possible.
BTCjam.com PRESS RELEASE
[BTCJam] - Arbitration Announcement, Legally binding loan contracts
June 27, 2013, 12:16:17 PM
Greetings,
Today we are announcing a major improvement in our service, provided by our new partnership with net-ARB.com, the oldest and most reliable international internet-ARBitration firm.
Over the past few months, many of you have expressed the need of a regulation that would reduce the chances of default. Even though, you continued to use BTCJam platform, diversifying your investments as a way to maintain good profits. We appreciate your confidence.
However, we understand that the service can and must be improved. Aiming to ensure that defaults are reduced to a minimum, our partnership with net-ARB will allow unpaid loans to be claimed legally.
What does this mean?
It means that all the defaulted loans will be subject to arbitration. The arbitration process is available to all loans serviced after 03/30/2013, free of charge.
What is arbitration?
Arbitration is a faster, more efficient, legal alternative to the court system. It is interesting to note that arbitration was the only means of resolving disputes for thousands of years before there were courts. Courts actually embrace arbitration to resolve civil disputes since it reduces the size of court dockets.
Arbitrators are neutral third-parties to whom the parties yield the power to decide the dispute and render an arbitration award similar to a court judgment while avoiding the cost and delays common in court litigation. Arbitration is binding (cannot be appealed) and is recognized and enforced in nearly 150 countries under The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).
The benefits we expect from this partnership:
- Safer investments
- Debt renegotiation
- Enforcement
More detailed information about the international arbitration process on https://btcjam.com/partners
Thank you for your continued support.
Sincerely,
Celso
BTCJAM - Peer to Peer Bitcoin Lending
https://btcjam.com
Arbitration FAQ
Q: What is International Arbitration?
A: Arbitration is a faster, more efficient, legal alternative to the court system. It is interesting to note that arbitration was the only means of resolving disputes for thousands of years before there were courts. Courts actually embrace arbitration to resolve civil disputes since it reduces the size of court dockets.
Arbitrators are neutral third-parties to whom the parties yield the power to decide the dispute and render an arbitration award similar to a court judgment while avoiding the cost and delays common in court litigation. Arbitration is binding (cannot be appealed) and is recognized and enforced in nearly 150 countries under The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).
Q: What are the benefits of International Arbitration?
A: Safer investments and debt renegotiation.
Q: Which loans are susceptible to arbitration?
A: All loans made after 03/30/2013.
Q: When is a loan sent to arbitration?
A: When it is overdue for more than 90 days.
Q: Do I need to submit the loan to arbitration myself?
A: No, the loans are sent to arbitration automatically. The borrower and all the investors will be notified if it happens.
BTCJam Rules - International Arbitration
Any controversy or claim arising out of or relating to this contract, or the breach of this contract, shall be settled by binding internet arbitration by net-ARB.com. The arbitrator's decision shall be final and legally binding and judgment may be entered thereon.
ABOUT BITCOINS by bitcoin.org
A Bit of History
Bitcoin is one of the first implementations of a concept called crypto-currency, which was first described in 1998 by Wei Dai on the cypherpunks mailing list. Building upon the notion that money is any object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context, Bitcoin is designed around the idea of a new form of money that uses cryptography to control its creation and transactions, rather than relying on central authorities.
In 2009, the first Bitcoin specification and proof of concept was published in a cryptography mailing list by a member under the pseudonym of Satoshi Nakamoto. Towards the end of 2010 Satoshi left the project, saying he had moved on to other things. The creator of Bitcoin never revealed his identity and simply left his invention to the world. The origin and the motivation behind Bitcoin are still today a great source of mystery.
Since 2010, the Bitcoin community has grown with many developers working on the project. During June and July 2011, Bitcoin suddenly gained media attention leading to a massive buy rally. The resulting bubble slowly deflated through the latter part of 2011, and since then the value of Bitcoin has slowly climbed once again back to its 2011 heights.
On September 27th 2012, the Bitcoin Foundation was created in an effort to standardize, protect, and promote Bitcoin. Today, the Bitcoin economy is developing quickly with new users joining every day.
Technical features
These are the basic features of any Bitcoin-like network.
- Bitcoins can be transferred between arbitrary nodes on the network.
- Transactions are irreversible.
- Double spending is prevented by using a block chain.
- Transactions are broadcast within seconds and verified within 10 to 60 minutes.
- Transaction processing and money issuance are carried out collectively through mining.
- Transactions can be received at any time, regardless of whether your computer is turned on or off.
Statistics
The Bitcoin network has been running continuously for more than 48 months, yielded impressive security features and grown significantly in the past year. As of April 2013:
- Long block chain with more than 232,000 blocks.
- One of the largest distributed computing networks in the world with more than 65 terahashes/s.
- Millions of US dollars in daily trade volume distributed across 50,000 transactions.
- Total value of all bitcoins in circulation is over US 1.3 billion dollars.
- Only one major security incident in the protocol which was fixed in August 2010.